The automotive industry has undergone transformational changes in the last decade and stands at a tipping point. In a hyperconnected world where volatilities in the supply chain and procurement networks produce ripple effects across KPIs of cost, quality and environmental standards and compliances, automotive companies need to explore new means to navigate supply chain and procurement challenges of industry 4.0. Moglix Business partners with leading automotive companies to provide them effective insulation from supply chain risks.
Aided by a strong recovery in the United States since the last major crisis and steady growth in China, the automotive industry is seeking opportunities to stay the course of sales growth amidst continuously evolving contours of regulatory, environmental and economic environments that are likely to affect their supply chains.
Restructuring of existing rules-based engagements on trading blocs including the proposed United States-Mexico-Canada Agreement (USMCA), Brexit and rationing of tariff rates by the United States and China on a reciprocal basis is likely to lead to shifts in operations, secular review of sourcing and procurement practices by stakeholders across supply chains and disruptions to cost structures. Automotive supply chains are likely to witness major re-alignments in product portfolios, manufacturing operations, global sourcing and vendor management practices owing to evolving policy responses to challenges of climate change and carbon emissions by regulatory agencies in matured markets. Automotive OEMs are also likely to experience major economic impacts and thus, review existing compliance procedures holistically across their supply chains on account of major tax reforms initiated in emerging economies like India that are consolidating fragmented legacy tax systems and institutionalizing singular, simplified and technology-driven taxation systems. Rising input costs and diversity in consumer demand for automotive products across geographies may call for automotive manufacturing enterprises to seek new opportunities to increase economic and technical efficiencies across the supply chain and create new avenues for vendor consolidation and a gradual shift from existing bottle-shaped supply chains characterized by heavy dependence on suppliers based on specific geographies towards pyramidal and lean supply chains with more geographically diversified and dispersed vendor portfolios.
Set against the backdrop of the above-outlined challenges, enterprises in the automotive industry need to continuously search for and explore new avenues of efficiency through cost rationalization in production, vertical integration of vendors and realignment of their global procurement networks. To stay competitive and relevant amidst competition, automotive enterprises shall have to explore the potential of multi-country supply chains and global sourcing and procurement models emerging from new-age free trade agreements (FTAs). Automotive enterprises need to build greater flexibility, granularity and agility into their supply chain design to be in a better position to leverage sourcing opportunities across geographies, restructure existing supplier portfolios to respond to supply-side shocks, disruptive policy swings and geopolitical risks and insulate revenues and margins from the effects of rising input costs over the long term by creating new opportunities to increase the proportion of domestic and regional value of content and components through nearshoring models of manufacturing, outsourcing and procurement.
The Moglix Advantage
At Moglix Business, we collaborate with automotive enterprises to provide supply chain consulting, analytics-based SaaS offerings and packaging solutions to address gaps in their supply chain and explore new avenues of efficiency and cost rationalization.